How profitable can an oil or natural gas well be? Here in S.E. Michigan, several oil and gas wells are turning a nice profit:
Some Southeast Michigan wells produce quite well. One Jordan and West Bay joint venture in Troy, near the Michigan State University Management Education Center, cost less than $3 million to drill in 2002 but has produced about $60 million of natural gas since then, with MSU and the Michigan Department of Transportation as an adjacent landowner splitting about a one-sixth royalty or $10 million on sales since then, Brower and Gibson said.
Another well, at Kensington Metropark in Milford Township, has made about $13 million since the 1990s, Gibson said. Explorers usually negotiate a royalty of one-eighth to one-sixth of the revenue that wells produce in oil or natural gas, pro-rated to their share of the property covered by the lease.
He estimates West Bay has drilled about 50 sites in Southeast Michigan since 1986, of which about half have since wrapped production and are now plugged. The company reports more than a dozen active wells in Oakland County and about a half dozen each in Macomb and Wayne; it could start drilling the new well in Scio Township under its July 3 permit within 60 to 90 days.
Its three permits in White Lake Township were all issued within the past two years, and West Bay is also a co-investor on a well in Livonia that has been collecting from reserves beneath Schoolcraft College since 2009, he said.
Southeast Michigan “has been a comparatively unexplored area, and there’s unique geography here,” he said.
But Brower said the first White Lake site is only producing a moderate yield of oil so far, and drilling is not yet complete on a second one.
He also said the state continues to have a few regions of high investment and interest, like suburban Detroit and the Gladwin County and western Saginaw Bay areas, but Michigan as a whole is still in a fairly slow year and local companies have begun exploring other states.
Contrary to popular belief, a natural gas / oil well is much less an eyesore than a stupid windmill overwhelming the horizon. Here’s the natural gas well at Schoolcraft College mentioned above:
These wells are much smaller than a windmill and actually produce energy.
The United States government has direct ownership of 30% of all land within the United States and has dragged their feet issuing leases for oil and gas exploration on Federal Land preventing construction of new wells to add to our national energy production.
Not to be outdone by the fed’s, local butinski’s are working overtime trying to block economic development:
Although gas and oil drilling is heavily regulated by the Michigan Department of Environmental Quality, the City of Auburn Hills has determined that it also has the right to oversee this activity through its Zoning Ordinance. The Michigan Zoning Enabling Act, which specifically states that counties and townships do not have the authority to regulate oil and gas wells; does not mention cities or villages. Because cities and villages are not specifically addressed in the Act, it has been determined by our City Attorney that cities and villages have some limited ability to regulate such operations.
A small natural gas well that produces an economic benefit is unacceptable. Good plan guys….